20220304-招银国际-Shifting_into_efficiency_enhancement_4页_840kb

Bilibili (BILI US) Company Update Summary

Core Content and Key Highlights

Bilibili delivered strong results in 4Q21, with revenue exceeding consensus by 1% and non-GAAP net loss beating expectations. The company's focus is shifting toward efficiency enhancement and cost control to improve margins and achieve profitability in the long term.

4Q21 Performance

• Revenue: RMB5.78bn (+1% above consensus), driven by strong ads (+120% YoY) and VAS (+52% YoY).
• Non-GAAP Net Loss: RMB1,660mn, which beat the consensus of -RMB1,729mn.
• GPM: 19.4%, slightly below 3Q21's 19.9% but in line with guidance.

1Q22E Guidance

• Revenue Guidance: RMB5.3–5.5bn (+36%–41% YoY), midpoint 2% below consensus but above buyside expectations.
• Non-GAAP GPM: Expected to be flat at 19.4%, but non-GAAP OPM is projected to improve by 5ppts due to opex scale back and efficiency gains.

Long-Term Outlook

• Target for FY24E: Non-GAAP OP breakeven and GPM reaching 30%.
• FY22E Forecast: Topline growth of +30% YoY, with game revenue flat, ads up 50%, and VAS up 36%.
• GPM Pressure: Short-term pressure from game headwinds, but overall non-GAAP OPM is expected to improve.

Financial Overview

Revenue Breakdown (4Q21)

Key Financial Metrics

• GPM: Expected to rise from 19% in FY22E to 30% in FY24E.
• Operating Margin: Projected to improve from -25.8% in FY22E to -4.2% in FY24E.
• Adj. Net Margin: Expected to improve from -21.3% in FY22E to 0.7% in FY24E.
• Non-GAAP OPM: Expected to improve by 5ppts in FY22E.
• Non-GAAP NPM: -21% in FY22E.

Investment Recommendation

• Rating: BUY
• Target Price: US$55 (from previous TP of US$110)
• Upside/Downside: +98.6% from current price of US$27.7
• Reasoning: Despite short-term GPM volatility, the company is expected to benefit from cost optimization and monetization improvements, with a focus on ads and VAS as growth drivers.

Market and Investor Context

• User Metrics: MAU expected to grow +27% YoY in FY22E.
• S&M/Rev Ratio: Expected to improve by 5ppts, reflecting higher marketing efficiency and lower TAC.
• G&A Leverage: Expected to support margin improvement.
• GPM Volatility: Likely to be a short-term challenge, but manageable with efficiency initiatives.

Share Performance and Market Position

• Stock Data:

  • Market Cap (US$ mn): 11,690
  • Avg 3 mths t/o (US$ mn): 248.36
  • 52w High/Low (US$): 145.9 / 28.0
  • Total Issued Shares (mn): 304

• Shareholding Structure:

  • FMR LLC: 3.79%
  • State Street: 3.50%
  • Vanguard: 3.29%

• Share Performance:

  • 1-mth: -10.5% (Absolute) / -6.1% (Relative)
  • 3-mth: -49.0% / -43.0%
  • 6-mth: -64.0% / -59.8%

Analysts and Related Reports

• Analysts: Sophie Huang, Eason Xu
• Related Reports:
  • Mixed 3Q21, with stepping-up content investment – 18 Nov 2021
  • China Internet: Embracing a new normal of regulation – 8 Nov 2021
  • Full-year growth intact – 20 Aug 2021

Risk and Disclaimer

• Risks: The report contains general information and is not tailored to individual investors. Past performance is not indicative of future results.
• Disclosure: CMBIGM has investment banking relationships with the companies covered in this report.
• Conflict of Interest: CMBIGM may have conflicts of interest and may have proprietary positions or investment banking relationships with the companies mentioned.
• Distribution Restrictions: This report is not for public distribution and is intended for institutional investors only in the U.S. and may not be shared with other individuals without prior consent.

CMBIGM Ratings

• BUY: Potential return of over 15% over next 12 months
• HOLD: Potential return of +15% to -10% over next 12 months
• SELL: Potential loss of over 10% over next 12 months
• NOT RATED: Stock not rated
• OUTPERFORM: Industry expected to outperform the relevant market benchmark
• MARKET-PERFORM: Industry expected to perform in-line with the relevant market benchmark
• UNDERPERFORM: Industry expected to underperform the relevant market benchmark

Summary

Bilibili is showing improved performance in 4Q21, with revenue exceeding expectations and a non-GAAP net loss that beat the consensus. The company is focusing on efficiency and cost control, aiming to achieve non-GAAP OP breakeven by FY24E and GPM of 30% in three years. While short-term GPM pressure from the game segment is expected, the company is projected to see improvements in OPM and NPM. The BUY rating is maintained, with a revised target price of US$55, reflecting lower topline estimates and lower P/S multiple. Investors should be aware of GPM volatility and the potential for margin improvement in the long term.